S 1243119th CongressIn Committee

Paying a Fair Share Act of 2025

Introduced: Apr 1, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

Paying a Fair Share Act of 2025 would create a new, separate “Fair Share Tax on High-Income Taxpayers” (Part VIII, Sec. 59B) added to the existing individual income tax structure. The tax targets high-income earners—defined as an adjusted gross income (AGI) above $1,000,000 (with a 50% threshold for married filing separately)—and is designed to be phased in: no tax at or just above $1,000,000, rising to the full amount as AGI approaches $2,000,000, after which the full rate applies. The tax is computed as an amount derived from a “tentative fair share tax” (30% of AGI over a modified charitable deduction) minus certain existing tax liabilities and credits, then multiplied by a phase-in fraction that ranges from 0 to 1. The modification to the charitable deduction depends on how much of itemized deductions a taxpayer is allowed to claim under the regular tax system, and only those who itemize deductions (not those who take the standard deduction) are eligible for this fair share calculation. The proposal would begin applying to taxable years beginning after December 31, 2024, and the bill includes a Senate sense-of-the-Senate statement encouraging broader tax reform.

Key Points

1Creates a new Fair Share Tax on High-Income Taxpayers (Part VIII, Sec. 59B) to be added to Subchapter A of the Internal Revenue Code, effective for taxable years beginning after 12/31/2024.
2How the tax is calculated:
3- A phase-in rule applies: the final fair share tax equals an amount (the “tax base”) times a fraction that increases from 0 to 1 as AGI rises from the inflation-adjusted $1,000,000 threshold toward $2,000,000, capped so the fraction does not exceed 1.
4- The tax base (the “amount of tax”) is the excess of the tentative fair share tax over certain other tax liabilities and credits: specifically, it’s the tentative fair share tax minus (the regular tax liability plus payroll tax) plus credits allowed under part IV of subchapter A (except certain credits).
5Tentative fair share tax and the modified charitable deduction:
6- Tentative fair share tax equals 30% of AGI over a “modified charitable contribution deduction.”
7- The modified charitable contribution deduction is a ratio-adjusted version of the regular charitable deduction (the deduction under section 170, scaled similarly to the regular itemized deduction before/after applying section 68). If a taxpayer does not itemize deductions, the modified charitable deduction is zero.
8- The modified deduction is designed to reflect how much of the regular charitable deduction a taxpayer would receive after the normal limitation on itemized deductions is applied.
9High-Income taxpayer definition and adjustments:
10- A “high-income taxpayer” means an individual (not a corporation) with AGI over $1,000,000 (50% of that amount for a married individual who files a separate return).
11- The $1,000,000 threshold is inflation-adjusted after 2025 using the cost-of-living adjustment, and rounded to the nearest $10,000.
12Interaction with existing taxes and credits:
13- The new tax is in addition to other taxes; it is calculated by taking the computed base tax and applying the phase-in multiplier.
14- It does not count as a tax under this chapter for purposes of certain credits, and it does interact with payroll taxes (as part of the calculation of the base tax). Credits allowed under part IV are subtracted in calculating the tax base, with specific exclusions (e.g., credits under sections 27, 31, and 34 are excluded from the credits subtraction).
15Special rules and ancillary provisions:
16- Estates and trusts use a special AGI computation (per section 67(e)).
17- The bill contains a sense-of-the-Senate provision encouraging broader tax reform and framing this as an interim step to a more comprehensive reform.
18- Clerical amendment adds the new Part VIII header to the table of parts.
19- The approach includes an inflation adjustment mechanism and a rounding rule to the nearest $10,000.

Impact Areas

Primary group/area affected- High-income individuals with AGI above $1,000,000 (and above $500,000 for married filing separately, due to the 50% threshold). These taxpayers would face an additional tax, phased in from zero at $1,000,000 to full impact by $2,000,000 AGI, subject to the phase-in floor.Secondary group/area affected- Taxpayers who itemize deductions: the modified charitable deduction relies on the ratio of itemized deductions to deductions before applying the 68 limitation, so the effect depends on whether a taxpayer itemizes and on the composition of their deductions (e.g., SALT, mortgage interest, charitable contributions).- Charitable giving incentives: because the modified charitable deduction diminishes the charitable deduction in the fair share calculation (and non-itemizers get zero in the calculation), behavior could shift for high-income donors depending on how itemized deductions are used.Additional impacts- Tax administration and compliance: adds a new separate tax calculation with a phase-in mechanism, a new definition of high-income taxpayers, and modification rules for charitable deductions. Taxpayers and preparers would face new forms and guidance.- Revenue and deficits: proponents argue the measure would raise federal revenue (the bill contends it could help reduce the deficit by billions annually), though exact amounts would depend on behavior, effective dates, and interactions with other tax provisions.- Charitable giving and tax planning: changes to the charitable deduction’s role in the calculation could influence large charitable contributions and the planning around itemized vs. standard deduction choices for high-income households.AGI (adjusted gross income): gross income after specific adjustments, used to determine eligibility for many tax benefits.Itemized deductions: deductions claimed when taxpayers list specific deductible expenses (as opposed to taking the standard deduction).Section 170 and section 68: provisions governing charitable deductions and the limitation of itemized deductions for high earners, respectively.Payroll tax: taxes for Social Security and Medicare (the bill references the payroll tax as part of the base calculation).Section 55: the minimum tax provision; the bill excludes this fair share tax from being treated as a tax imposed by this chapter for purposes of determining credits or other interactions.

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